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Your debt-to-income ratio – or DTI for short – is a number that compares how much you owe each month to how much you earn each month.

Why Does This Ratio Matter?

Lenders use your debt-to-income (DTI) ratio to determine your ability to repay a loan and keep up with payments. Lenders determine their own ratio requirements for lending.

What Is a Good DTI?

  • Less than or equal to 35% = Good
  • 36% - 49% = Opportunity to improve
  • Greater than or equal to 50% = Bad

What Is a Good DTI?1

People with a good DTI likely have money left over after paying monthly bills.

People in the opportunity-to-improve range are getting by, but should consider ways to save for unplanned expenses.

People with a bad DTI have at least half of their income going toward debt and are unable to save or afford other unexpected costs.

Calculate Your Debt-to-Income Ratio

Step 1: List all your recurring monthly debt, including mortgage, car payments, student loans and credit card payments.

Step 2: Add all your monthly debts together.

Step 3: Write down all your monthly income, including wages, tips, business income, Social Security and other sources – before taxes are taken out.

Step 4: Divide your monthly debt by your monthly gross income. Then multiply that number by 100 to get a percentage.

Interested in finding ways to reduce your debt-to-income ratio?

Ask your local banker or visit our Financial Wellness Center to learn more.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting or legal advice.